This invention relates to bill paying processes and systems. More specifically, it relates to financial data processing systems and, in particular, to payment receipt and acceptance systems which utilize a coupon document in combination with a customer initiated negotiable instrument, such as a bank check, for accomplishing the application of funds to an installment type of account receivable or balance forward record.
Typically, installment paying processes are accomplished through a variety of manual procedures and automated systems; however, all incorporate a similar characteristic; namely, the preparation and mailing of a package of periodic payment coupons designed to be returned by mail or directly presented by the payor with an accompanying payment usually in the form of a bank check.
Upon receipt by the payee or alternately, a lockbox at a depository bank, of the incoming remittance envelope, the contents are examined, sorted, and, if certain acceptance criteria are met, the two documents (coupon and check) are compared by manual or automated means, and appropriate data is extracted and records are generated. One record is used to debit and credit funds to the payee's and payor's balance forward or accounts receivable. An additional record prepares the bank check for deposit at the payee's financial institution for processing the check through the check clearing network for application to the payor's account at a financial institution and ultimately returned as a cancelled check to the payor with the monthly checking account statement to allow the payor to reconcile the checking account and be used as proof of payment, if needed. The check clearing process requires the amount of the check to be encoded with a machine readable code by manual or automated means by the depository financial institution preparatory to the clearing process.
The above method of processing is widely used for routine household bill paying for a variety of products and services. Typical uses are mortgage and installment loan payments, consumer finance payments, home improvement loans, lease rentals and insurance premium payments. The public has accepted this method of processing and it has become routine procedure in most households.
These processing systems, however, have certain disadvantages. For example, the labor intensive, manual processes that must be performed in combining the two types of documents (coupon and check) that are necessary to properly create the application records generate many problems (called "exceptions"). Some of the problems involve a check without an accompanying coupon, a coupon without an accompanying check, incorrect payee, stale-dated or postdated check, incorrect payment amount, multiple documents of either type, restrictive notations, unidentified payee, cash payments and third party checks. Each of these exceptions requires manual decisions, special handling, and costly labor intensive processes. Even without these problems, the proper combining of the two documents results in duplicate, redundant processing steps such as microfilming, control total generation, reconciling steps, and dual audit trails. Consequently, this method of processing is expensive, time consuming and error prone.
Corporations that perform this type of processing absorb the highest portion of these costs and have been experimenting with alternative methods such as electronic remittance processing. The Automated Clearing House (ACH) process is one type of electronic payment system. Typically, the customer initiates a request to the corporation to electronically charge the customer's checking account for the exact payment on a predetermined date each payment period. Electronic transfers are made at that time, crediting the customer's payee's accounts receivable or balance forward and debiting the customer's checking account at the appropriate financial institution. While this process is quite automated, consumer acceptance has been minimal and it has not been successful on a national scale. As a result, the volumes are low and corporations must be equipped to process in both the electronic and the more expensive paper based modes which in turn result in overall higher costs. Customers, in general, have not accepted the electronic method of payment because they recognize that they do not control the timing of the payment, have no receipt and are unfamiliar with procedures to initiate stop payments, to change financial institutions, or to discontinue the service.
Household bill paying procedures in certain European countries utilize a single document process called a "GIRO". It is essentially a bill or invoice which includes a return portion to effect a funds transfer. The payor authorizes payment by signing the return stub and indicating the payment amount, and returning that portion to the issuer or to a central processing service. Funds are transferred upon receipt of the document. The accounts receivable is credited, and the payor's depository funds are debited.
In the GIRO method, the return portion is not a negotiable instrument and does not provide the payor nor the payee the legal protection afforded under the Uniform Commercial Code. The major differences between the check clearing process and the Federal Reserve System in the United States as compared to those in a European country do not allow a GIRO system to operate efficiently within the United States. This coupled with the "central bank" concept in Europe versus the large number of United States commercial banks, savings banks, savings and loan associations and credit unions (over 16,000) which provide Demand Deposit Accounts preclude the use of the GIRO process in this country.
An alternative bill paying method was introduced in the early 1970s called "Bill Check." This method allowed the authorization of an accounts receivable payment by the payor signing the return bill stub, indicating the amount to be paid and returning the stub to the billing agency or payee. Funds transfer documents were manually prepared which would credit the accounts receivable, debit the payor's checking account and credit the payee's account at the depository financial institution.
This method was not popular with the consumer and was not economically justified by the payee because of its costly manual functions and high incidence of error conditions. This method was never adopted for the payment coupon method of installment payment.
Additionally, since the documents generated did not meet the Uniform Commercial Code with respect to negotiability, issues concerning stop payment and other types of return items were not solved.
An automated system which would incorporate the essential elements of the current two documents used in conventional coupon payment systems into a single document thereby reducing the time, the labor, the documents processed, the correction procedures needed to resolve errors, and the resultant expenses of such processing is and has been desirable. Moreover, such an automated system that would preserve the characteristics of the standard payment coupon would provide the consumer and bank with an unquestionable high level of acceptance and widespread use, as well as significant economic gains and would expedite the availability of funds for the using corporation.